Cooking Up Profits: How a Healthy Supply Chain Can Improve Customer Satisfaction, Reduce Costs and Mitigate Risk

According to 2017 figures from the National Restaurant Association, roughly more than one million restaurants across the country ring up $799 billion in sales each year, so it goes without saying that creating a niche helps these establishments stay competitive. But those that are truly able to excel are the organizations that can identify potential trends, lower operating costs and improve customer service in order to meet the rapidly changing needs of diners.However, the odds of success in the restaurant industry are low, with 60 percent failing or changing hands, and as result many are looking to leverage technology in order to compete and remain competitive.

Unlike other businesses, the restaurant and food industry face some formidable challenges. One of the biggest threats to restaurants is inside the kitchen itself. Cases of contaminated food products are constantly in the news with eight outbreaks reported in 2017 alone. This year, the Centers for Disease Control reported 19 outbreaks in the first nine months of 2018. Jory Lange, a lawyer specializing in food-safety cases, estimates that for every reported case of food-borne illness, about 20 go unreported. 

The landscape has changed in the last few years which has created a number of new demands on restaurants and their suppliers including:

• Evolving Tastes and an Emphasis on Sourcing Local: People today are seeking a wider variety of tastes and ethnic dishes and to make healthier choices from food sourced locally or by trusted sources. In fact, the National Restaurant Association reports that 40 percent of consumers say that diet-specific food options are a determining factor in their choice of restaurants. To address this shift, owners and managers need to extend menu staples to address the expanding palate of diners and purchase supplies from local establishments to ensure freshness.
• Increased Competition and the Advent of the Digital Critic: Seeking Alpha reports that in the last 17 years, restaurants have opened at twice the rate of the growth of the population. This means increasing competition for established restaurants and chains. In addition to the sheer number of choices, consumers have made huge shifts in how they decide where to dine, often choosing based on customer reviews from their mobile devices. Achieving stellar customer service has moved beyond the restaurant’s four walls and created even more challenges for eateries looking to capture the hearts and stomachs of diners in today’s digital generation.
• Dining Alternatives and the Growing Popularity of Meals on the Go: Adding to the loyalty complexity is the number of restaurant “substitutes”. Take the food truck industry for example. According to the Economist, this industry is growing at almost four times that of the restaurant industry, at 7.9 percent per year versus the restaurant’s 2 percent. 

Another indirect competitor is less visible, and it can be found lurking in a consumer’s local grocery store. Defined by Steven Johnsonas any retail food item that is ready to eat, or ready to heat, “grocerants” are hitting our neighbor markets, creating a new form of competition as hungry patrons opt to buy high-quality prepared meals while picking up their everyday staples. Aside from offering hot food and ready to heat meals, some also offer seating so it can be consumed in-store. The NPD Group, a restaurant research organization, reportsthat 40 percent of the population eat in-store or buy prepared meals. 

Why a Steady Diet of Impeccable Data is Key to Dishing Up Loyal Diners

While there is no silver bullet solution, the inability to effectively deal with these challenges can be traced to the “data-starvation diet” that cripples many under-performing supply chains. 

Data famines impact a restaurant’s ability to make profitable decisions, and to effectively execute on those decisions across the supply chain.

Case in point; after researching over a 1,000 companies across 50 countries, Neilson, Martin and Powers found in their article Secrets to Successful Strategy Execution, that the flow of data is one of the most critical factors in determining the ability of a company to execute effectively. 

Functioning much like food in a healthy diet, data provides the fuel needed to keep the business healthy and vibrant, but only if it is both “fresh” and complete. Data, like ingredients, have a shelf life as it can lose its value and its benefits as it ages. Data that is a periodically transferred in batches down the supply chain, becomes stale quickly as events on the ground unfold and render it invalid. 

Similarly, in order for the supply network to function smoothly, all critical data must be available and shared where necessary. The supply chain needs constant nourishment, i.e., access to all the data ingredients, including restaurant/store point-of-sale data, and online order information, to inventory holdings, shipments from distributors, suppliers and logistics providers. An optimal supply chain needs an unimpeded flow of key milestones, events and statuses across orders, shipments and inventory. Only then can managers (and the system itself) make intelligent decisions, adapt and respond to issues early, and resolve them before they become major problems.   

Yet, this data is sorely lacking in most restaurant and food service supply networks. This makes it difficult if not impossible for executives to gain a global view, and to analyze and adjust strategy based on actual performance and the cost to serve customers. Without complete, fresh and authoritative data, managers and executives are forced to rely on guesswork, or try to reconcile scattered and conflicting data and reports.

From Farm to Fork: How Modern Networks are Serving Up Trusted Data

Achieving operational efficiencies in a distributed food supply chain requires all parties to have the same, accurate, real-time view of the entire supply network.

In order for all parties to converge around a single data model and a single version of the truth, many are adopting new, cloud-based multiparty networks. This ensures that all relevant data is collected continuously from across all demand channels (such as orders through restaurants, stores, websites and apps), and across all the supply network nodes, to form a complete picture. This data can then be appropriately “permissioned” and parceled out or rebroadcast to restaurants, distributors, suppliers and carriers, so they have visibility into crucial events and statuses.  

When orders are created (or updated) all partners are instantly aware of those changes. Likewise, all relevant parties are instantly aware of changes in shipments and inventory. Missed milestones and other anomalies trigger alerts, enabling them to plan, adapt and respond to issues faster and thus more effectively and cheaply.

In fact, when using a unified platform with a single, synchronized source of the data, the possibilities for improved operations multiply, as it helps drive better optimization of orders and inventory and better alignment between functions. Integrating order management, replenishment, and shipment processes, helps ensure the timely delivery of the right ingredients and supplies to the right restaurants in the right quantities. 

These networks can also take advantage of artificial intelligence, to optimize and automate replenishment based on actual consumption, to create highly accurate order forecasts and orders. They do this by aggregating real-time meal order data from point-of-sale across all channels, use recipes to translate meals into raw ingredients and supplies, then flow those orders back through the network to distributors and through all tiers of suppliers. Achieving this consumer-driven optimization and automation not only dramatically reduces inventory and waste, but it also frees restaurant managers from the burden of calculating and second-guessing orders, saving time and reducing errors. 

Multiparty platforms also give restaurants the ability to spot and quickly respond to trends, proactively adapt menus and promotions based on available supplies. They can capture data about customers and local preferences so that menus can be customized to be more appealing to patrons and prospects at the local level.

It allows companies to capture and use customer data to personalize and reward the best customers and ensure they enjoy a seamless experience whether online, offline, or a hybrid. Companies can also monitor and adapt promotions easily and quickly based on shifting preferences and the price and availability of local produce. 

How Transparency Can Help Restaurants Prepare for When Things Go Sour

Let’s face it, despite everyone’s best intentions, things can still go wrong. From foodborne disease outbreaks to recalls, managers and operators need visibility into all ingredients from farm to fork, so the entire supply chain can collaborate more closely and respond to problems quicker. 

With complete visibility spanning the entire supply chain, managers can gain insight into who has what, when they had it, and where it went, which allows all parties to remain in compliance and reduce the risk of mishandling and or accidentally contaminating the product. In the event of a recall, the network also helps to quickly identify the exact food in question, its origin and contact points. This minimizes customer exposure to the problem and ensures rapid and precision recalls that reduce the negative impact on customers, brand and employees.

Cooking Up Profits with a Diet Rich in Data

With fresh and complete data, food and restaurant companies can expect a dramatic improvement in a variety of areas. For instance, some companies have achieved a 20-30 percent improvement in forecast accuracy with others reporting almost near-perfect forecasting at 85-90 percent accuracy. Data improvements have also led to impressive reductions in inventory across the entire network leading to a 50 percent reduction at the restaurant; a 72 percent reduction in waste; and a 50 percent improvement in available shelf-life. 

While these real-world statistics are important, they tell only half the story. The network offers all parties a new level of transparency, cohesiveness and a deeper global perspective on the trading network as a community serving the end customer.  Leveraging these new insights reduces confusion and builds trust and confidence in the data, the plans, and among the trading partners themselves. This deeper understanding leads to better alignment around strategy and objectives, and tighter cooperation and smoother, more collaborative execution. 

By aligning the entire restaurant supply network around real demand data, and by automatically optimizing and automating processes such as ordering, restaurants can achieve huge productivity gains, lower inventory and waste. Restaurants also free up time to tackle more important issues such as delivering an excellent experience to customers.